An Unreal Unit (UU for short or just "units") is the basic unit of length in the Unreal Engine. Distances, brush dimensions and collision cylinder sizes are always measured in UU, velocities in UU per game second and so on. The grid in UnrealEd is is based on Unreal Units.

Angular units for rotator values are occasionally called "Unreal Units" as well, though this is a slightly different thing. Sometimes you also see the term "Unreal Rotation Unit" or "Rotational Unreal Unit" (URU/RUU) used instead.

Relation to real-world units

There is no fixed relation between Unreal Units and real-world units such as meter or inch. The actual scale depends on the game.

Unreal Engine games seem to be based on a scale where 16 UU roughly correspond to 1 foot, or 52.5 UU to 1 meter. The actual scale differs for the various games, though. You can get a rough idea about a specific game's scale by comparing the collision cylinder size of the player class to an average human's size. You will often notice that the horizontal and vertical scale don't quite match:

These values obviously differ from the 16UU=1ft scale mentioned above, with the newer UT games being closest to this scale. Keep in mind these are vertical scales and just as roughly estimated as any other scale in the Unreal Engine. Map dimensions should not be based on converted real-world scales, but instead on player movement metrics.